Gaming board boosts slots tax to 56.5 percent

Added 1.5 percent will help cover panel's operating costs.

The state's tax on casinos, already one of the highest in the nation, will rise 1.5 percentage points today in an effort to stave off financial woes at the Gaming Control Board.

The increase will bring the tax to 56.5 percent of the casinos' revenues from slot machines, with the 1.5 percent going to the regulatory agency.

Strapped for cash because of the casinos' later-than-expected opening dates, the gaming board informed casino operators on Monday and Tuesday of the tax hike. For those casinos already operating, the levy is retroactive to their opening date.

Additionally, the board will borrow $800,000 from each of the three operating casinos -- Pocono Downs, Harrah's Chester Casino & Racetrack and Philadelphia Park -- and the two casinos expected to open before June 30 -- Presque Isle Downs near Erie and the Meadows in Washington County.

The increase, which is substantially less than the 5 percentage points previously proposed, appeased the Mohegan Sun at Pocono Downs and some other casino operators, but left at least one crying foul.

Sands BethWorks, which is licensed for a Bethlehem casino, testified Tuesday before the Senate Community, Economic and Recreational Development Committee that the 1.5-point increase for the gaming board will unfairly penalize its casino.

Fred Kraus, general counsel for the Venetian Casino Resort in Las Vegas, said parent company Las Vegas Sands is investing more money in the south Bethlehem site than many other casino operators are investing in their sites. As a result, Sands BethWorks expects to have more amenities, attract more visitors and make more money.

With the flat 1.5 percent tax on casino revenue for the gaming board, larger casinos contend they will pay a higher percentage of the board's operating costs.

Smaller operators like Mohegan Sun and Harrah's were relieved that the tax increase was lower than proposed, but still questioned its fairness, saying the first casinos to open will pay the state more than those that open later.

"It has always been understood and anticipated that the operators that opened first would not have a disproportionate burden of paying the expense to create the regulatory framework to start the gaming industry in the commonwealth," said Robert Soper, president and chief executive officer of Mohegan Sun at Pocono Downs.

However, the casinos that open first are operating in a "less competitive and therefore more lucrative environment," said Revenue Secretary Gregory Fajt.

Additionally, casino operators say the more a state taxes their profits, the less money they invest in casinos there. Pennsylvania's 55 percent tax -- not including the tax for the board -- will lead to fewer casino amenities and comps, gambling experts say.

Of the 55 percent, 34 percent goes toward property tax relief. The remaining money is earmarked for a variety of things, including local economic development and the racing industry.

"The harsh reality is that for every small increase in the percentage of administrative fees we must pay, it creates an exponential impact on our bottom line and our ability to generate any return on our investment in Pennsylvania," Soper said.

But gaming board Chairman Tad Decker said the agency has no choice but to levy the tax. The agency has been scraping money together from a number of sources since it started in 2004.